Taking Stock

There will be a new UFCW Local 400 election this spring after United Food and Commercial Workers International president Joe Hansen found merit in claims that former president Tom McNutt (who resigned late last year) may have violated union bylaws by working on his campaign during working hours (not vacation time) in the previous Local 400 election last October. The allegations were made by candidate Ralph Ramirez who finished third in that election. However, after further review, this seems more like a technicality since Ramirez received fewer than 500 votes from the largest UFCW Local in the country with about 35,000 members. Actually, new Local 400 president Mark Federici has done a fine job since taking the helm late last year, providing a calmer, more balanced approach than his predecessor…Weis Markets has named Wayne Bailey, VP-supply chain and logistics, a new post at the Sunbury, PA retailer. Bailey, who’s spent his entire career at Weis, is well-suited for this emerging and important post, having previously served as VP-merchandising and most recently as a regional VP in store ops. We wish Wayne all the best as he gets fitted for a new Weis hat. Also at Weis: Rick Seipp has been promoted to VP-pharmacy operations, replacing Joseph Douglas. Seipp came to Weis from Rite Aid in 2010. The regional chain, which was feted at the annual Multiple Sclerosis dinner/fundraiser at the Marriott Waterfront Hotel in Baltimore on March 2, cut the ribbon on two new (former A&P/Super Fresh) stores the next morning in Towson, MD (55,476 square feet) and Woodlawn, MD (Security Boulevard – 58,027 square feet). Weis invested $14 million in the two stores. A third A&P acquisition in Hillsborough, NJ, should open later this year…down the road apiece from Sunbury, hats off to Ahold USA and its “Our Family Foundation” for donating nearly $67 million to charitable endeavors through its retail banners last year. About $31 million of that amount came in the form of hunger-related donations. Ahold USA also announced a new three year initiative to distribute $9 million in “Fighting Child Hunger” grants from its foundation. In financial news from the big Dutch retailer, it was a very good fourth quarter for the men and women from Amsterdam and Carlisle. For the period ended December 29, 2012, Ahold’s overall sales rose 5.1 percent to $10.1 billion and underlying operating income jumped 4.1 percent to $461.5 million. At AUSA, net sales were up 4.3 percent to $6.1 billion and ID revenue increased 2.4 percent. Operating income was up $16 million to $255 million and the 765 U.S.supermarkets provided a 4.2 percent operating margin. “During the year, customers were focused on price and promotions, without compromising on quality. In response, we were able to simplify our business and save costs so that we could invest more into offering great value to our customers. We were able to increase the target for our 2012-2014 cost reduction program from $455 million to $780 million by further driving our efforts to simplify our business where we see opportunities, such as optimizing our commercial processes and driving own-brand profit. As part of our strategy we are broadening our offering to customers. Our U.S.businesses are improving their own-brand product lines to give customers more choices at different price points to fit their budgets. We are building our online business on both continents to give customers more shopping alternatives, and we continued to achieve double-digit online sales growth in food. Our acquisition of online retailer bol.com enabled us to provide Dutch and Belgian customers with a far wider selection of non-food products. Customers appreciate the convenience of the pickup points we opened during the year, including the first Peapod pickup points in the United States, and our first pickup points in the Netherlands,” said Ahold CEO Dick Boer. One final thought about the Northeast’s top retailer: with Giant/Landover’s senior VP-operations Shane Sampson departing to reconnect with his Albertsons roots (he’ll head up Shaw’s in New England – truly a daunting task) and Jim Nazzaro exiting a few months earlier as VP-sales and merchandising, the big regional banner has lost its top two sidemen to president Anthony Hucker…Mark Ordan, co-founder of Fresh Fields and former CEO of Sutton Place has been named to the board of Harris Teeter. Clearly, the very bright entrepreneur will have a lot on his plate as he joins the Matthews, NC retailer at a very pivotal time in its history…another North Carolina based retailer, Delhaize America (DA), is also making news, but this ain’t the kind of news that will make you applaud. Roland “Chainsaw” Smith, who replaced the retired Ron Hodge as CEO last October, has already gutted his management staff and announced that about 45 stores (Food Lion, Sweetbay and Bottom Dollar units) would close by the end of this month. To perform that kind of whackin’ in only three months is quite remarkable. Clearly, beleaguered DA needed a major overhaul, but the fear here is that Smith really hasn’t recruited any notable replacements from the outside or promoted broadly from within the ranks of the Salisbury, NC retailer. He seems to have essentially given more responsibility to those executives who made the cut. That’s putting enormous pressure on those who have taken on more responsibility without any visible payoff thus far at store level or with sales. In the past few weeks another round of layoffs was announced; this time 350 associates (500 if you include 150 “open” positions) above the store manager level were riffed. Smith’s mandate clearly is to “change the view” at the struggling Belgian-owned retailer, but you’ve got to wonder how this will pay off in the long run without a discernible new game plan…talk about the continued unpredictability of financial analysts – Whole Foods’ recently completed first quarter (ended January 20) met with disappointment by those Wall Street process jockeys when the Austin, TX retailer posted numbers slightly below expectations. Here are the hard numbers and I’ll let you judge how “disappointing” the fast-growing retailer’s performance actually was: net income (profit) increased 24 percent (to $146 million); overall sales gain was 14 percent (to $3.9 billion); and identical store sales increased 7.9 percent. Additionally, Whole Foods opened 10 stores in the first quarter and has opened one store so far in its second quarter and will debut another five new units in the current period. It has also signed 11 new leases including units that will open in Toronto, Canada; Berkeley, CA; Los Angeles, CA; West Palm Beach, FL; Lafayette, LA; New Orleans, LA; Westford, MA; St. Louis, MO; Cherry Hill, NJ; Colleyville, TX; and Newport News, VA.These stores currently are scheduled to open in fiscal 2014 and beyond. The company also terminated one lease for a 57,500 square foot store in development believed to be the Riverdale, MD project in Prince George’s County. I think co-CEO Walter Robb framed the quarter correctly when he said: “We opened a record number of stores and delivered another quarter of strong sales and earnings growth. We are well-positioned to internally fund our expansion plans and have the pipeline and infrastructure in place for square footage growth to accelerate through 2014 and hopefully beyond.”…Safeway also enjoyed a solid fourth quarter with profits up 13 percent to $244 million, overall revenue gained 1.3 percent and ID sales (excluding gas) increased 0.8 percent. In his conference call to analysts following the financial release, Safeway CEO Steve Burd, who will retire from the chain he has led for 20 years in May, touted the early success of its new “Just For U” digital platform and said that the program’s success could enable the big Pleasanton, CA chain to eliminate print newspaper ads perhaps as soon as the end of this year. Locally, Safeway will cut the ribbon on its remodeled and expanded Belle View (Alexandria, VA) unit on March 15. That store has been closed for about six months while undergoing extensive renovations and the addition of 5,300 square feet. It will be 45,000 square feet when it reopens…despite predictions of gloom and doom regarding first quarter sales, Wal-Mart had a solid quarter with total sales jumping 3.9 percent to $127.5 billion and earnings increasing 7.9 percent to a whopping $5.6 billion for the period ended January 31. Comparable store sales at its U.S.units grew by 1 percent. The Bentonville Behemoth also acknowledged it has spent $157 million thus far on its internal investigation concerning the role Wal-Mart executives played in the 2004 Mexican bribery scandal. And then there’s an interesting Wal-Mart story that appeared in Bloomberg News concerning rising out-of-stocks at the planet’s largest retailer. Bloomberg reportedly got hold of some minutes from an internal memo fromU.S. CEO Bill Simon, who said that the problem is “self-inflicted” and getting worse. Simon added that out-of-stocks posed the biggest risk to Wal-Mart’s growth. However, Wal-Mart spokesman David Tovar said the company was “very pleased with our out-of-stock position.” Huh? Have they let Tovar out of the main office in Bentonville to visit stores occasionally? Perhaps if Mr. Tovar spent less time at his “spinning” class and actually recognized that Simon’s statements were painfully spot-on, he’d have more credibility with the media in general…in major CPG news, Warren Buffet’s Berkshire Hathaway group and Brazilian businessman Jorge Paulo Lemann, principal in 3G Capital (a couple of billionaires who happen to be personal friends), have agreed to acquire H.J. Heinz for $28 billion including the assumption of $4 billion in debt. Each party will control 50 percent of the acquisition. That’s a whopper of a deal especially for Lemann, whose firm acquired control of Burger King in 2010, and might know a little bit about ketchup consumption. However, this deal is months away from final FTC approval and might be slowed by an SEC inquiry that froze the assets of an unnamed Swiss trading account which the agency claimed made $1.7 million from options purchased the day before the Heinz deal was announced… some quick takeaways from last month’s National Grocers Association (NGA) convention held in Las Vegas. First, it was the best NGA show I’ve ever been to, and who would have thought Natan Tabak, senior VP and CIO at Wakefern was such a funny guy? Also, Joe Sheridan, Natan’s boss and this year’s NGA chairman, proved once again that he’s an enlightened and charismatic industry leader. Both appeared in an industry conference entitled “Growth Opportunities for Independents: Four Major Trends.” Also on the panel was Tom Furphy, CEO and managing director of Consumer Equity Partners. Clearly, a man with a 30 pound brain, Furphy previously was VP-consumables for amazon.com, which included AmazonFresh, where he supervised the Internet giant’s emerging grocery, HBC and fresh business. His message to traditional bricks and mortar retailers was daunting and somewhat scary, predicting exponential growth for online shopping in a short period of time…a few obituaries of note to report: passing on last month was Andre Cassagnes, 86, the French electrical technician who invented the Etch A Sketch, one of the greatest toys ever created, especially for people like me with limited artistic chops and a short attention span to boot. Cassagnes, who invented his device in the late 1950s, subsequently sold his meal ticket invention to the Ohio Arts Company, which still owns and produces Etch A Sketches for global pleasure. Also departing terra firm was C. Everett Koop, 96, perhaps the most influential surgeon general inU.S. history. Koop, who served eight years as the “nation’s doctor” during the Reagan administration, was a game changer in terms of his stance against the evils of tobacco and his role in candidly informing the public about the emerging AIDS epidemic. Long before he became surgeon general, Koop was widely recognized as a pioneer in the field of pediatric surgery. Two musicians from opposite ends of the spectrum also passed away last month. Van Cliburn, the classical pianist who stunned the world by winning the first International Tchaikovsky Competition in Moscow in 1958 when he was only 23 and the Cold war was at its peak, has left us. Cliburn’s performance at the Moscow musicfest was so impressive, even Russian Premier Nikita Khrushchev, the most evil of men in the eyes of the U.S. government at the time said, “If Cliburn’s the best, then give him first prize.” Cliburn died in Forth Worth, TX at the age of 78. And bluesman “Magic Slim” (born Morris Holt and not be confused with other blues legends “Magic Sam” or “Slim Harpo”) has also died. Born in 1937 inTorrance,MS, Magic Slim followed other blues greats Muddy Waters and Howlin’ Wolf up from the Delta toChicago to hone his craft. During his career, the guitarist and singer released more than 30 albums and won the 2003 “Blues Music Award.” “If you were going to take somebody who’d never seen the blues to one of Magic’s shows, it would be like putting them in a time machine and putting them in 1962,” said Marty Salzman, his manager. “No frills, no rock ‘n roll. It was just straight- ahead, real-deal blues.” Great description; I would have liked to visit that place in time.